As its name suggests it is a universal social security scheme for transforming a BPL (Below Poverty Line) person to APL (Above Poverty Line) by guaranteeing minimum income per month to h/her instead of providing subsidies on various items and services.
Is implementing UBI is equal to giving a dole (making them inefficient)?
The idea of a universal basic income (UBI) for citizens is being discussed in many developed countries. While several economists have favoured such a proposal, it has now also caught the attention of policymakers in several European nations.
A proposal for UBI in Switzerland was defeated in a referendum, but this has not deterred other countries. The Netherlands and Finland are set to start a pilot project from 2017.
Essentially, UBI is a transfer by the state to all its citizens. In some ways, UBI is similar to a negative tax or subsidy.
For many, UBI is just an extended version of the direct benefit transfer (DBT). In that sense, the argument for a universal basic income is essentially a move towards cash transfers in place of in-kind transfers.
The issue in India is not just access to cash but also the supply and accessibility of basic services to a large majority of the population.
There are a number of cash transfers, including scholarships and social pensions, that are currently being given by central and state governments. The reason these have not led to major improvements in educational, health and nutritional outcomes has been the lack of basic infrastructure.
Given the huge deficits in availability of public education and health facilities, UBI can only increase the demand for these services without increasing the access to these services.
The challenge for the Indian government is to first improve the availability of public services with better access and delivery of these services to the citizens.
A UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP, On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP.
Although it is a conceptually appealing idea but with a number of implementation challenges lying ahead especially the risk that it would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable.